GLD sheds another 4 tonnes gold, but prices stabilizing as dollar slips

The New York gold price closed at $1,072.90 down from $1,085.20 on Monday, a fall of $12.30.  In Asia prices drifted higher to $1,073.70 as the dollar strengthened slightly to 98.58 up from 98.42 on the dollar Index. The euro is at $1.0856 stronger than yesterday’s $1.0818 against the dollar. The London a.m. LBMA gold price was set at $1,071.75 down from $1,082.70 on Monday’s.  In the euro the fixing was €986.79 down from Monday’s $1,000.65. Ahead of New York’s opening, the gold price was trading at $1,071.85 and in the euro at €986.79.  The price recovered after NY opening back to $1,075 as the dollar index slipped a little.  

The silver price in New York closed at $14.28 down 27 cents. Ahead of New York’s opening the silver price stood at $14.23.

Price Drivers

The short covering that drove gold and silver prices higher last week appears to be slowing down, leaving those prices vacillating in the $1,070 area. The fall was assisted by further sales from the SPDR gold ETF which now seem to be settling down to see the gold and silver prices consolidating. This may well persist throughout the week.

There were sales of 4.167 tonnes of gold from the SPDR gold ETF and nothing from the Gold Trust, on Monday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust. The 4.167 tonne sale from the SPDR gold ETF was large and certainly contributed to the fall in the gold price. If gold does consolidate, we expect to see such sales dry up. But we don’t expect any large moves in gold and silver this week until next week after the Fed has stated its case.

Over in India the government’s weak attempts to monetize gold and prevent smuggling are continuing to fail, as expected. Government and bureaucratic corruption is so endemic there, that the Indian investor has lost trust in the government and banking system. This leaves the gold held at temples at a massive total of over 2,000 tonnes. While the temples on the surface are examining the schemes, they are not yet inclined to go along with them. We doubt that they will, willingly.

The problem of distrust in the Indian financial system translates into a gold market that hides smuggled gold and integrates it into the 2 million strong, gold markets. This will continue until duties are brought down to near to zero, when the advantages that come to smugglers are eliminated. We cannot see any schemes by government that requires the disclosure of personal gold holdings to the government, via the banks, succeeding. But the day will come when government reaches into the temples to ‘acquire’ that gold.

The silver price remains strong over $14.00 despite the current setback and should hold up over the week.

Julian D.W. Phillips for the Gold & Silver Forecasters www.goldforecaster.com and www.silverforecaster.com

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